SAP announces it's acquiring cloud HR software provider SuccessFactors (SFSF) for $40/share in...

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SwingTraders Comments (80)
 
Bombs away, Salesforce! About the time you begin to trim your revenue push to boost your bottom line, your competitors will be wooing customers with bargain basement prices that you can't compete with. They have the cash war chest and you have capitalized expenses as far as the eye can see.
3 Dec 2011, 04:32 PM Reply Like

mP1 Comments (386)
 
What if they want CRM !?!?
3 Dec 2011, 08:42 PM Reply Like

Josh Krause Comments (1365)
 
This is a $3 billion deal. The ORCL/RNOW deal was a $1.3 billion deal.

CRM is currently sitting at $16 billion market cap.

These acquisitions are small in comparison.

Let's look at the cash stockpiles of potential suitors:

Microsoft - $54B cash, $13B debt - Can afford it but already offering competing service
Oracle - $31B cash, $14B debt - Can barely afford it but already offering competing service
SAP - $5B cash, $5B debt - Can't afford it, Can hardly afford SFSF


Why buy CRM when you can buy a competitor and attack CRM's already horrible profit margins?

CRM might pop on this news, or it might tank. Low priced competition with massive cash stockpiles buying up the competition does not mean that CRM is in the running to be acquired, they are simply too big to buy out so the competition will more likely just take their customers with competing services instead.

When ORCL bought RNOW, CRM was down for two days afterwards. What will happen now? Who knows but this acquisition makes CRM less likely of an acquisition target, not more. It also makes it harder for CRM to continue to their acquisition spree to hide losses through tax credits as this will only make future acquisitions more costly for everyone.
4 Dec 2011, 10:45 AM Reply Like

foodforthought Comments (150)
 
Wrong....when ORCL acquired RNOW....CRM popped ~3% and was down the next 2 days for Europe related and other macro reasons...

You shorts still think that someone's loss is someone's gain....

No, the $3.6 trillion IT sector is in the midst of a long transformation and this is not a zero-sum game and this tidal wave will lift all the players higher going forward...
4 Dec 2011, 02:50 PM Reply Like

foodforthought Comments (150)
 
This transformation will especially benefit pure vanilla players such as CRM which doesn't have conflicting agendas like ORCL and SAP which has been against this booming cloud computing business for years (because they still want their clients to spend billions for hardware and on-premise software) and recently switched their position because they see the upcoming switch from on-premise to on-demand....
4 Dec 2011, 02:59 PM Reply Like

SwingTraders Comments (80)
 
Just like competition in the tablet space is good for Apple? Just like competition in the streaming media and video rental business was good for Netflix? Just like foreign competition in the auto business helped American auto manufacturers?

You are correct, the cloud is transforming the software business and now the NFLX equivalent first mover (Salesforce) is seeing the Redbox, Walmart, Amazon equivalents entering the space. The big difference is that ORCL, MSFT, and SAP have strong cash flows, popular and highly regarded software and war chests to fund and subsidize their moves into the cloud. Meanwhile CRM, after almost twelve years has a diluted ttm eps of two cents a share. GAAP earnings of $.02 on a $120 stock. Cash flow is pitiful. You want us to believe that a company so financially mismanaged is going to magically be making $8 or more per share in the foreseeable future and that this rising tide will lift all ships? Please! By the time CRM takes earnings from $.02 to earnings justifying its current share price (if ever) , the next big thing will already be upon us.
4 Dec 2011, 03:53 PM Reply Like

foodforthought Comments (150)
 
Please do not tell me about the 7,000 TTM P/E multiple!!!...First, who cares about the GAAP accounting; Second, who cares about the trailing EPS.

SFSF Forward P/E: 238x (non GAAP)
CRM Forward P/E: 73x (non GAAP)

SAP paid 8x forward revenue for SFSF...

SFSF will be accretive to SAP after 2012, even trading at 238x P/E before the acquisition. Why?

Look at CRM....in case of an offer, please go ahead and delete the R&D expenses, marketing expenses and some of the G&A expenses on the income statement and calculate the potential earnings potential for the acquirer.

Also, cash flow is pitiful? The projected cash flow per share is ~$4.25 for FY 2013, which will be revised higher when CRM provides full-year 2013 guidance. (don't forget, FY 2013 is equivalent of 2012 CY for CRM).
4 Dec 2011, 04:10 PM Reply Like

SwingTraders Comments (80)
 
"First, who cares about the GAAP accounting; Second, who cares about the trailing EPS."


Non-GAAP earnings enable companies to produce figures that show revenue growth and EPS growth without accounting for costs and how that growth was achieved.

"Investopedia explains Non-GAAP Earnings:
Regulation from the governing financial bodies requires that every company reports according to GAAP principles to ensure that accurate and useful information be available to all potential users. The uniformity of the information makes comparison among industry measures easier. It is important as a savvy investor to ensure that the information you are using for comparison follows the GAAP rules and is not the (often more publicized) non-GAAP earnings number."

As to your statement about no one caring about trailing earnings I can only say it is the difference between what is real and proven versus what has not yet happened.

As to your cash flow number for 2013, Salesforce.com has indicated that other than revenue projections, it will not provide 2013 guidance until after 4th quarter 2012 earnings come out. As of the most recent quarter, cash flow is lower now than it was in the spring of 2010 or for that matter, the early part of 2011. I applaud you for your optimism, but most investors are more interested in facts than hypotheses.
4 Dec 2011, 06:51 PM Reply Like

foodforthought Comments (150)
 
Wrong again!
5 Dec 2011, 08:26 PM Reply Like

vaughanj Comments (5)
 
The key word is integration. Salesforce and other "cloud" solutions do not natively integrate with Oracle Applications, SAP, Dynamics, etc. And as a CIO, I refused to spend the mountain of money required to integrate these applications with the rest of my ERP and Financial software, especially when my ERP provider had a similar solution that was part of the bundle.

Yes, Salesforce is a slick web application <cough cough>, excuse me, "Cloud Solution", that sales people like. And that's about the limit of its future.
4 Dec 2011, 03:21 AM Reply Like